The use of a credit card has an undeviating impact on the most crucial factors that influence your credit score. It is, therefore, one of the fastest and most effective ways to build or rebuild your credit by using a credit card and that too using it regularly and responsibly. Follow the given guidelines for productive credit card usage.
Pay on Time and Completely
Your credit score computes how you handle your debt – taking the money and paying it back. To have a good credit score, you need an overview of the timely debt payments. If you have never made any on-time payment then you can’t have a good credit score. We can say you have no credit at all.
If you do not yet make payments on a loan, you can build up your credit score on a credit card with regular expenses without having to pay any debts. All you have to do is pay your credit card bill fully and on time every month. The card issuer will definitely report your payments to the credit bureaus. You do not even have to pay interest if you pay your bill in full. 35% of your FICO credit score is made up of your payment history, so this is one of the best choices you can opt to increase your creditworthiness.
Think of It as a Debit Card
A possible risk for credit cards: your bank balance does not change when you make purchases. Only if you pay your credit card bill, money will be withdrawn from your account. So if you’re not cautious, you can lose sight of how much you spend.
Keeping a budget is the wisest decision to make, doesn’t matter if you use credit cards or not, you will have the idea of how much money you’ve got to spend. Use your credit card as a debit card and purchase only those items for which you are sure you can pay fully in the bill. The more you focus on spending within your capabilities, the easier it will be to avoid having a balance and paying high interest.
Keep Low Balance
The balance you owe is the second most crucial element in your FICO score and it makes up around 30% of your credit score. In addition to determining how much you owe in general, FICO looks at your credit usage or the balance that you owe as a percentage of your available credit. The higher your usage, the more likely it is that you will be overloaded and possibly miss payments. If you keep your credit card amount on a relatively low balance, your credit can, therefore, be increased considerably. Aim for 30% or lower.
Please note that even if you pay your credit card account completely on the due date each month, you may still have a high occupancy rate. The remaining balance on your monthly account is generally the amount that card issuers report to the credit bureaus. To keep usage low, consider paying twice a month instead of waiting for your statement.
View Your Choices Carefully
If you are just beginning with the credit or have made faults in the past, it is obvious that you will not be approved for the best offers in the market. The best cards usually need great credit.
Instead, focus on credit cards that are specifically designed for people with bad or a fair credit score. Although their rewards and benefits are not as amazing as those offered by the top cards, they are a nice beginning point if you do the work to get qualified for better offers.
Do you think it can not hurt to apply for credit card, even if it is unlikely that you will be approved? Wrong. Every time you request a new credit card, the issuer checks your credit score. These types of checks can hammer points from your score. Furthermore, multiple credit card applications can harm your score even more in a short period of time, because this may indicate that person is in financial difficulties.
Key is the Clever Usage
Improper use of credit cards can damage your creditworthiness, but that does not make credit cards bad. On the contrary: responsible credit use can help you build up your credit score without having to pay debts.
If credit card debt – or consumer debt in general – is the reason that your credit is less than stellar, you must think twice before using a card to build it. Having a high credit limit can be harmful if you have been overspending in the past.
Canadian Cash Solutions is one of the best loan providing company in Canada. You can have your credit score build up with our various helpful options. To get started call us at +1(855) 622-8564(Toll-Free), or you can simply apply online.